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Test your basic knowledge |
AP Microeconomics
Start Test
Study First
Subjects
:
economics
,
ap
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
study here
.
Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Ed = 0 - no response to price change
Scarcity
Opportunity Cost
Perfectly inelastic
Marginal Benefit (MB)
2. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits
Substitute Goods
Cartel
Marginal Resource Cost (MRC)
Spillover costs
3. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability
Oligopoly
Complementary Goods
Market power
Resources
4. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit
Average Product of Labor (APL)
Long Run
Total variable costs (TVC)
Shutdown Point
5. Es = (%dQs) / (%dPrice)
Four-firm concentration ratio
Complementary Goods
Price Elasticity of Supply
Positive externality
6. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.
Demand for Labor
Average Product of Labor (APL)
Producer surplus
Surplus
7. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms
Monopolistic competition
Absolute Advantage
Production function
Demand for Labor
8. Two goods are consumer substitutes if they provide essentially the same utility to consumers
Substitute Goods
Surplus
Relative Prices
Opportunity Cost
9. MUx / Px = MUy/Py or MUx/MUy = Px/Py
Least-Cost Rule
Opportunity Cost
Determinants of Supply
Utility Maximizing Rule
10. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product
Marginal Product of Labor (MPL)
Relative Prices
Free-Rider Problem
Perfect competition
11. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF
Unit elastic demand
Determinants of elasticity
Resources
Allocative Efficiency
12. When firms focus their resources on production of goods for which they have comparative advantage
Monopoly
Specialization
Perfectly inelastic
Dead Weight Loss
13. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly
Spillover benefits
Luxury
Four-firm concentration ratio
Cross-Price Elasticity of Demand
14. Entry of new firms shifts the cost curves for all firms upward
Increasing Cost Industry
Marginal Revenue Product (MRP)
Inferior Goods
Marginal tax rate
15. The sum of consumer surplus and producer surplus
Total variable costs (TVC)
Explicit costs
Total Welfare
Accounting Profit
16. TR = P * Qd
Total Welfare
Total Fixed Costs (TFC)
Total Revenue
Derived Demand
17. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.
Total Welfare
Economics
Price discrimination
Law of Diminishing Marginal Utility
18. The difference between total revenue and total explicit costs
Total Fixed Costs (TFC)
Absolute Advantage
Accounting Profit
Luxury
19. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax
Monopoly
Average Fixed Cost (AFC)
Excise Tax
Constant cost industry
20. Entry of new firms shifts the cost curves for all firms downward
Decreasing Cost industry
Perfect competition
Derived Demand
Excess Capacity
21. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic
Implicit costs
Scarcity
Total Revenue Test
Consumer surplus
22. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity
Marginal Productivity Theory
Law of Demand
Monopsonist
Excise Tax
23. A good for which higher income increases demand
Long Run
Determinants of Demand
Normal Goods
Unit elastic demand
24. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC
Variable inputs
Marginal tax rate
Profit Maximizing Resource Employment
Average Product of Labor (APL)
25. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials
Market Equilibrium
Normal Profit
Variable inputs
Total Revenue
26. Occurs when LRAC is constant over a variety of plant sizes
Constant Returns to Scale
Perfectly elastic
Marginal Cost (MC)
Absolute prices
27. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.
Economies of Scale
Specialization
Excess Capacity
Substitution Effect
28. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit
Fixed inputs
Monopoly long-run equilibrium
Price Elasticity of Supply
Monopolistic competition long-run equilibrium
29. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter
Average Fixed Cost (AFC)
Shutdown Point
Non-collusive oligopoly
Relative Prices
30. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good
Price discrimination
Absolute Advantage
Negative externality
Monopolistic competition
31. Ed > 1 - meaning consumers are price sensitive
Spillover costs
Cross-Price Elasticity of Demand
Monopolistic competition long-run equilibrium
Price elastic demand
32. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment
Cross-Price Elasticity of Demand
Excise Tax
Free-Rider Problem
Excess Capacity
33. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market
Monopolistic competition
Substitution Effect
Complementary Goods
Total Revenue
34. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary
Accounting Profit
Break-even Point
Cross-Price Elasticity of Demand
Derived Demand
35. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0
Marginal Benefit (MB)
Excess Capacity
Perfectly competitive long-run equilibrium
Long Run
36. AVC = TVC/Q
Perfectly competitive long-run equilibrium
Diseconomies of Scale
Least-Cost Rule
Average Variable Cost (AVC)
37. A good for which higher income decreases demand
Inferior Goods
Marginal Cost (MC)
Shutdown Point
Luxury
38. The total quantity - or total output of a good produced at each quantity of labor employed
Incidence of Tax
Profit Maximizing Rule
Total Product of Labor (TPL)
Scarcity
39. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income
Excess Capacity
Scarcity
Marginal tax rate
Price elasticity
40. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices
Economics
Normal Profit
Market Economy (Capitalism)
Cartel
41. Models where firms are competitive rivals seeking to gain at the expense of their rivals
Non-collusive oligopoly
Economic Profit
Monopolistic competition long-run equilibrium
Monopoly
42. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources
Productive Efficiency
Normal Profit
Unit elastic demand
Consumer surplus
43. Costs that change with the level of output. If output is zero - so are TVCs.
Total variable costs (TVC)
Spillover benefits
Perfect competition
Total Revenue
44. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it
Producer surplus
Total Fixed Costs (TFC)
Free-Rider Problem
Production function
45. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.
Price elasticity
Unit elastic demand
Total Fixed Costs (TFC)
Economics
46. The most desirable alternative given up as the result of a decision
Perfect competition
Perfectly inelastic
Opportunity Cost
Average Product of Labor (APL)
47. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately
Complementary Goods
Diseconomies of Scale
Scarcity
Production function
48. Models where firms agree to mutually improve their situation
Total variable costs (TVC)
Collusive oligopoly
Marginal tax rate
Marginal Product of Labor (MPL)
49. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus
Economics
Price floor
Price Ceiling
Free-Rider Problem
50. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur
Perfect competition
Constant cost industry
Implicit costs
Total Revenue